Apple hit with 3G iPhone lawsuit

August 21, 2008 5:29:20 AM PDT

ASHLEY PHILLIPS and KI MAE HEUSSNER

Amid growing criticism from 3G iPhone customers, a class action complaint was filed against Apple Tuesday in U.S. District Court in Alabama. The lawsuit alleges that despite aggressive marketing that the 3G iPhone is "twice as fast for half the price," the much-hyped smartphone is actually much slower than advertised and prone to dropping calls.

"Apple sold these devices on the promise that they were twice as fast as the pre-existing phones and that they would function suitably, or properly, on the 3G network. But, thus far, Apple and the phone have failed to deliver on this promise," Jonathan Kudulis, an attorney with Birmingham, Ala.-based Trimmier Law Firm, told ABCNEWS.com. Trimmier is the firm representing the Ala.-based plaintiff, Jessica Alena Smith.

But Kudulis says, because the complaint was only filed yesterday, Apple has not yet been officially served with the lawsuit.

Apple does not comment on pending litigation, a company spokeswoman said.

Earlier this week, as customers complaints ran rampant, Apple released a software update for the 3G iPhone on iTunes.

The software, called iPhone OS 2.0.2, is for "bug fixes," but whether that includes the problems customers described to ABCNews.com is unclear.

So far, Apple has not released a statement elaborating on the software update.

The company has been tight-lipped, at least to reporters, about complaints of spotty service and potential hardware flaws on the new smart phone.

Last week, a company spokeswoman declined to answer ABC News' questions about widely reported dropped calls, slow Web access and lack of access to AT&T's 3G network voiced by readers to ABCNews.com.

In recent weeks, customer complaints about the new smart phone have reached a fever pitch, even on Apple's own Web site.

When 48-year-old Doug Clements, a retired "refugee" from the computer industry and a decades-long Apple fan, started a thread this week on Apple's discussion board describing his difficulties with the phone, he was surprised at the response he got.

Thousands of people from around the world replied to "iPhone 3G Reception Problems? You're Not Alone" to describe similar problems accessing the 3G network.

"I was just shocked that that many people replied," he said. "I am a true Apple fan, so this is nothing to make Apple look bad. & I think Apple should come out and tell people what's going on with these phones."

That "What's going on?" sentiment was echoed by readers from California to Germany, who related similar stories to ABCNews.com.

Dropped Calls, Cell Phone Service

Ambar Kulkarni, a 33-year-old software developer in Alpharetta, Ga., and his wife have experienced problems with their matching 3G iPhones. His biggest complaint? Dropped calls.

"My calls get dropped a lot, and I'm not even moving one inch, anywhere," he said. "I move my chair a little bit, and my call gets dropped. It's just weird."

Kulkarni says he did not experience the same problems with the first generation of the iPhone. He mentioned, however, that the Web download times seemed to be faster.

"I'm not so sure what it could be," he said. "I used to be on T-Mobile before the iPhone bandwagon. I thought T-Mobile was bad, but not like this."

iPhone Problems

Across the country in San Bruno, Calif., Brian Lew, a 30-year-old self-described "power user," said he experienced problems with the smart phone when it would switch from AT&T's 3G network to its slower Edge network.

"The 3G goes in and out. It will drop to Edge, then it will drop the call," he said. "If you're walking or driving, it will drop the call. I'll have full bars and full 3G, but it will drop the call after one ring. & I'm eager to see how 3G works [overseas]. I think that will be a pretty good test the network or the phone?"

AT&T has received few complaints, according to company spokesman Mark Siegel.

"Overall, the iPhone 3G is working great on our 3G network. Customer response has been tremendous. We couldn't be more thrilled with the results," Siegel said. "The problems you're hearing about are minor. We're not getting a lot of complaints about them. What we always urge people to do is sync their iPhone to iTunes. That way, they're always assured of getting the latest software updates."

The problems aren't affecting every iPhone user. Several customers sent e-mails to ABCNews.com to discuss their devotion to their phone and the positive experiences they've had with it.

"Mine works great with no problems," wrote Tim Staley of Fort Pierce, Fla. "I wonder what all the fuss is about."

Mike Emery in Fort Worth, Texas, wrote: "Purchased my iPhone first weekend! Have had zero problems. Best phone I have ever owned."

'Comes Down to Where You Are'

Jupiter Research analyst Michael Gartenberg characterized the problem as a minor one.

"Any product is going to exhibit a certain amount of problems. Well, I have reception problems with a variety of [carriers]. Reception in terms of cell phone really comes down to where you are," he said. "I'm not seeing anything that indicates that this [is] widespread. & If the Internet tends to magnify smaller problems, then the fact that it's an Apple product tends to magnify it even more."

On Thursday, Business Week cited anonymous sources as saying that the problem was with the iPhone, specifically a 3G chip manufactured by Infineon.

Infineon spokesman Mitch Ahiers declined to comment to ABCNews.com about the iPhone. "However, when it comes to Infineon's 3G chips, Infineon is not aware of any problems. Our 3G chips, for example, are used in Samsung handsets, and we are not aware of such problems there," he wrote in an e-mail.

iPhone 3G Recall?

If there is a problem with a chip, an iPhone recall could be possible, according to Rob Enderle, an independent Silicon Valley analyst.

"If it's a chip problem, those are going to need to come back," he said. "I don't think they'll be able to fix the problem" with a software update.

According to Enderle, the problems are indicative of a phone that was rushed to production.

"It has the feel of a product that was rushed to market and went through testing too quickly," he said. "They were very concerned about the number of competitive products coming to market so they rushed the phone out. And the end result was it wasn't done, it wasn't cooked."

"Cooked" or not, some loyal Apple fans and current iPhone owners seemed frustrated and bewildered. Will the iPhone problems damage the Apple brand?

"This is Apple's first 3G phone, and it is a very, very high profile. & It is a product that is sold as much on its design appeal as its data communications capability," said NPD Group analyst Ross Rubin. "The greatest risk is likely among people who are new to the Apple ecosystem, and this may be their first product, [people] who were drawn by [a] lower price and this is what they have to go on."